Scramble interview with CEO & Founder Kamil Kurmakayev 2023

Scramble is a newly launched platform that offers investments in bundled loans to startups with high-interest rates. In this interview, you will learn from the CEO & Founder Kamil Kurmakayev how Scramble came about and what it means to invest with Scramble.

This is a written interview with Scramble. P2PMarketData does not receive statistics data to perform in-depth checks of the information and numbers presented by Kamil.

To learn more, get a quick overview of Scramble on P2PMarketData.

How do you find and assess the investments Scramble makes available to retail investors?

Scramble uses proactive research to identify and attract promising consumer goods businesses to fund. Currently, our main focus is Food & Drinks businesses that operate in the UK, but we also work with a number of Health & Beauty and Baby Products brands.

Before talking to a business for the first time, we first thoroughly evaluate publicly available data such as the presence of the brand’s products at prominent retailers, Instagram and LinkedIn social media accounts, press articles, and such. We are looking for signals that the business has already established a compelling brand in the market, has a reliable portfolio of sales channels, and is driven by a high-caliber management team. Once we believe the business has exceptional growth potential, we reach out to the management team for the next level of due diligence. In this next stage, we validate the bank transactions, accounting, financial, and operational data of the company to make sure publicly available signals are backed by the actual operational details.

Why should our readers choose to invest at Scramble?

Scramble is one of the easiest tools to start investing as a casual retail investor. Many of our customers have busy jobs and personal lives and do not want personal investment management to become a full-time occupation and source of additional stress. They are looking for a tool with minimal monthly effort, easy-to-understand assets, and attractive financial returns.

Scramble is an “investing as a subscription” service, with a new batch of promising brands brought to investors’ attention every month. Scramble’s team does the heavy lifting job of searching and validating businesses in the batch. As an investor, all you need to do is review the overall batch presented to you instead of doing the painful research and due diligence of each individual business in the batch.

If you do like the monthly batch, you invest in all businesses in it at once, getting instant diversification. For instance, if you decide to invest €100 into a batch of 10 businesses, each of them will get a €10 loan from you.

Finally, Scramble allows a choice between two loan types – a more protected loan A, and a riskier loan B. Simply put, loans A are paid first, and loans B are paid last. So investors in loans A are further shielded from possible losses by the capital of investors in loans B.

You can start with as little as €10 to see if Scramble is a good fit for you!

What sets Scramble apart from other business lending platforms?

Scramble introduces a new approach to retail investing – a monthly subscription with minimal effort. We know that some investors are looking for complex investing strategies and hard-to-evaluate assets such as cryptocurrencies, individual stocks of obscure companies, or high-intensity trading strategies. For us, that world of complicated finance is simply not particularly appealing due to the high amount of effort and stress it requires from an ordinary investor. Scramble is the opposite of such complexity. We love the simplicity and common sense. Our platform is built for common-sense investors who seek attractive yields with minimal effort, while still retaining the ability to control how their capital is invested.

Scramble’s underlying asset is working capital loans (funds for packaging, raw materials, inventory of finished products) of young consumer goods businesses. We are working with producers of easy-to-understand, high-margin consumer products such as granola, chocolate bars, non-alcoholic drinks, and the like. Scramble only backs businesses that have already demonstrated strong progress and established sound operational practices. So based on the business’ historic ability to convert inventory into successful sales, Scramble provides them with incremental funds for more sales in the future.

How do you decide when a loan is defaulted or with minimal chance of recovery?

Until now, Scramble saw 100% loan repayments from our portfolio of UK Food & Drink businesses. Of course, some loan defaults are inevitable in the future. However, Scramble is very well-positioned to minimize possible investor losses from such defaults. 

First, Scramble works closely with borrower businesses over a course of many months. We are not a one-off loan provider making large loans to a business based on a single evaluation. Instead, Scramble incrementally lends more and more funds in small tranches over a long period of time based on the growth trajectory of a particular company. This enables Scramble to deploy more and more funds to businesses with consistent growth and stop new loan deployments in case the business performance of a company is uneven. 

Second, Scramble works with teams that have lean operational structures. Simply put, our borrowers are typically managed by a 2-3 persons team of founders themselves. This means that in times of difficulty, our borrowers can maintain sales operations for many months without drawing large salaries or incurring other fixed costs. 

Third, Scramble provides funds for high-margin inventory. With every €100 they borrow on Scramble businesses typically create €150-200 worth of non-perishable product inventory. In times of trouble, businesses can sell their products at an aggressive discount and still make enough money to repay their loans.

Fourth, Scramble requires founders to provide partial personal guarantees of their business loan repayments. If a business fails to pay back the loans, it becomes the founders’ responsibility to repay the loan principal (typically, at least 40% of the borrowed principal or even more) over a period of up to 5 years. Scramble selects founders who are white-collar professionals with typically 5+ years of work experience prior to starting their current business. In case their current business fails, such founders have excellent chances of being re-employed again within a short period of time. 

Only after all of the four steps listed above are exhausted, Scramble considers the loan on the platform to be irrecoverable.

How is Scramble regulated?

Scramble OU operates pursuant to Estonian law.

In accordance with European legislation companies whose main business activities are crowdfunding services will be obliged to obtain the crowdfunding license by November 2023. Until then those companies which were authorized to operate under the local legislation can provide their services, i.e., crowdfunding companies are in a transition period until the license is obtained.

Under local laws that are currently in force in Estonia, crowdfunding services providers of all types are not required to apply for a license or similar authorization until November 2023.

As for the future, Scramble OU is already in process of obtaining a crowdfunding license from the Estonian authority Finantsinspektsioon (Estonian Financial Supervision and Resolution Authority).

What do you think the future of Scramble looks like? Which challenges do you see for the industry in the coming years?

Scramble is addressing a major gap in the market – lack of access to working capital for promising consumer goods companies. Every year in the UK alone, over 100’000 such businesses are struggling to obtain working capital financing. We are working towards making sure that every competent founding team with proven early traction can get access to convenient working capital financing on fair terms.

In the current high-interest rate, high-inflation environment, more and more ordinary people are becoming dissatisfied with the deposit rates that banks are offering. Scramble is one of the easiest tools in the market for beginner investors to diversify their savings from zero-yield bank accounts. We expect that over the next 5 years, at least 1 to 2 million Europeans will start using peer-to-peer and crowdlending platforms as a supplement to regular bank savings accounts.

The crowdlending industry is dependent on thoughtful regulation that combines the interests of retail investors, business borrowers, and platform operators. Early steps taken by the European Commission and European Supervisory Authority are very encouraging in this regard, but there’s a long road ahead before crowdlending becomes as mainstream as classic savings accounts that banks offer.

What’s next for Scramble? Where do you see your platform in five years?

Scramble is a venture-backed startup company, with the financial support of prominent venture capitalists. So quite naturally, our ambition is to grow the company into a major player in the industry.

Within the next five years, we expect Scramble to become the de-factor industry standard for retail investment in working capital loans of consumer goods startups – quite similar to what platforms like LendInvest or EstateGuru have done to investments in real estate.